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Getting Started
In order to start
placing trades per the MCTO advisory, you will need to do the following:
1) Open a
Brokerage account that can handle options and also supports the capability to do
a 4 legged "condor" trade in a single transaction. We've heard that many
of the deep discount on-line brokers do not offer this capability. OptionsXpress is an excellent
choice and is preferred by the MCTO team, and they do offer the ability to place
4 legged orders in a single transaction. If you do choose OptionsXpress,
you will need to request Level 4 trading privileges, which is required by OptionsXpress to trade credit spreads.
Other brokers
might have different terminology so you will need to check with them to make
sure you are able to place index credit spreads.
All brokers will ask you to fill out a questionnaire asking about your level of
experience in trading options, and they will require a certain level of
options trading experience before they will grant you Level 4. Brokers like to
see the applicant buying about 20 or more calls and puts per year and writing 30
or more credit spreads per year as their required threshold to grant Level 4
trading privileges. This will give you some guidance as you fill out the
questionnaire. The brokers need to protect themselves, and this is why they
collect this info, regardless if this information is true or not.
If you don't show any past options trading experience on the questionnaire, they
will not grant you level 4 trading privileges, and you will not be able to
execute any credit spreads that are recommended through this advisory. If you need more help on this please contact us.
2) We recommend to start small with
as little as $1000 in your trading account and then to slowly increase the size
of your account as you gain experience in the types of trades that we recommend.
As a reminder, we do not manage money; we provide trade recommendations
and ongoing education to our subscribers and each subscriber is responsible to
place and manage their own money in their own trading account.
3) Subscribe
to an options analysis package such as Optionetics Platinum or Platinum Express.
This software will allow you to visualize the risk/reward graph for each trade.
This is not absolutely necessary, but it is encouraged when trading credit
spreads. However, from time to time we open directional trades such as
butterflies, debit spreads and straight puts and calls, and these can only be
visualized through a computer generated risk/reward graph. We do provide
the risk/reward graphs for these trades, but it would be much easier for you to
track your trades if you had access to your own options analysis package.
4) Link your
checking account to your brokerage account allowing you to easily transfer funds
back and forth. (ACH is the recommended type of linkage)
5) Have access
to additional funds for the one or two difficult months per year where we will
need to make adjustments to our trades to break even due to an unexpected surge
or drop in the market. MCTO recommends to have access to 25% of your
total active funds. For example, one who has $50k active in their options
brokerage account should have access to an additional $12.5k once or twice per
year. An excellent source for these funds would be a Home Equity Line of Credit. If you do have a credit line, link your credit line into your brokerage account
or your checking account giving you an easy way to move funds back and
forth.
6) Set up an
excel spreadsheet to track your trades and Return on Investment. If you
would like the spreadsheet that the MCTO team uses,
Click Here
to obtain the file.
7) Start out small and slowly add funds to your brokerage account as you gain experience and confidence with this particular options strategy....and don't give up. Learning and feeling comfortable with this strategy takes time and patience, but it's well worth the effort. And
by using the MCTO Advisory Service, you will reduce your learning curve dramatically and save
yourself a lot of money by avoiding costly mistakes.
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